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Government And Nonprofit Accounting > SU 9: Government Capital Assets > Flashcards

SU 9: Government Capital Assets Flashcards

(59 cards)

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1
Q

GASB statement covering leases

A

Statement no 87 (June 2017)

Required for fiscal years ending Dec 31, 2020 and following

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2
Q

What aspects of a lease must be considered to determine a short term from a long term lease?

A

For what period the lessee has a non-cancellable right to use the asset.

If there are options to extend the lease that are reasonably certain to be exercised

If there is a fiscal funding clause (government can cancel the lease if can’t get appropriations for payments) that is reasonably certain to be exercised

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3
Q

Short term leases

A

Maximum possible term of 12 months or less including options expecting to exercise

(Operating lease?)

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4
Q

Recording short term lease

A

Dr expenditure account
CR cash

For rental payments

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5
Q

Long term lease

A

Lease that is not short term

Provides lessee intangible right to use a capital asset

Creates lease liability for lessee (pv of payments expected to be made)

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6
Q

Government account for long term lease (capital lease)

A

Dr expenditures - capital outlay
CR other financing source

(As if lease is actually a purchase via long term borrowing )

Initial entry has no effect on fund balance

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7
Q

modified accrual Payments on capital lease obligation

A

Dr expenditures - lease principal
Dr expenditures - lease interest
CR cash or vouchers payable

(1st payment will not have lease interest as is made before interest accrues. Later payments will all be part principal part interest)

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8
Q

Where to report government capital assets and long term debt

A

Government wide financial statements

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9
Q

CIAG

A

Capital investment account group

A memorandum set of records that records all events affecting capital assets (including ones that might not flow through fund financial statements like write offs or theft)

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10
Q

Infrastructure assets

A

Long-lived capital assets that normally:
- are stationary in nature
- can be preserved for a greater number of years than most capital assets

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11
Q

How do proprietary funds account for infrastructure assets under the modified approach

A
  • depreciation expense not reported
  • costs to maintain ARE reported (allowable because governments expected to continue indefinitely)
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12
Q

Proprietary fund JE for lease inception

A

Dr intangible asset - lease
CR lease payable

Recorded at present value of lease payments

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13
Q

Proprietary fund JE for lease payments

A

Dr lease payable
Dr interest expense (second payment forward)
Dr cash

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14
Q

Proprietary fund JE for lease amortization

A

Dr Amortization expense
CR accumulated amortization - intangible leased asset

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15
Q

Amortization period for proprietary fund leased asset

A

Shorter of lease term or useful life of leased asset

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16
Q

GASB standard for asset impairment

A

For physically damaged assets: cost to restore service utility

For assets impaired due to changes in tech or law; written down based on service units expected to be provided before impairment vs after

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17
Q

When to use capital assets fund

A

if funds provided by government, individuals or organizations are restricted for the purchase and/or construction of capital assets

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18
Q

Common capital asset classifications

A
  1. Land
  2. Buildings
  3. Improvements (other than Buildings)
  4. Machinery and Equipment
  5. Construction in Progress
  6. Infrastructure (e.g., Roads, Streets, Bridges)
  7. Intangible Assets
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19
Q

Capital asset sources: acquisition

A
  1. Purchase
  2. Construction
  3. Contributed/Donated (DCA)
  4. Annexed
  5. Capital Leases
  6. Foreclosure
  7. Eminent Domain
  8. Escheat
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20
Q

Capital asset sources: Financing

A
  1. Tax supported bonds
  2. Grants from other governmental units
  3. Transfers from other funds
  4. Special assessment bonds or taxes
  5. Capital leases
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21
Q

Fund accounting for capital assets

A

(Modified Accrual)
ONLY expenditures are booked when asset is acquired

no depreciation

asset then recorded in schedule of long-term assets

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22
Q

Government-wide accounting for capital assets

A

Normal accrual accounting

assets capitalized and depreciated

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23
Q

General capital assets definition

A
  • Important assets
  • Belongs to the government
  • Benefit everyone as a whole
  • Not part of any particular funds
  • Could be dollar value or useful life that makes it a capital asset – depends on the government (can include intangibles)
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24
Q

Year end gov-wide notes must include what information about capital assets?

Study These Flashcards
A

List of major capital assets including:
- beginning and ending book value
- acquisitions
- sales and retirements
-current period depreciation

25
Modified accrual JE for purchase of capital asset
DR Expenditure - capital asset (capital outlay) CR Cash or A/P report in period when acquired with current financial resources
26
Accounting for asset purchase with trade in loss or gain Modified accrual vs government-wide
Modified accrual: DR Expenditure- Asset purchase Cr cash no gain or loss recognized only movement of capital Gov-wide: remove old asset, accumulated depreciation, and cash paid from books, add new asset, recognize gain (CR) or Loss (DR) on trade in
27
Purchase of capital asset under modified accrual
No matter how financed DR Expenditure- Capital Asset CR Other financing source - list source
28
purchase of capital asset financed with installment note: government-wide journal entry
DR capital asset CR Installment note payable (LT liability)
29
Purchase of capital asset financed with bond: government-wide JE
DR Capital asset DR Bond Discount or CR Bond premium CR Bond Payable (LT liability)
30
Recording operating lease
ST leases only - Consumption method DR prepaid operating lease CR cash or A/P (no AJE for gov-wide) then as expires: DR expenditure CR prepaid
31
Accounting for capital leases: Modified accrual
DR Expenditure - capital asset CR other financing source - capital lease convert to capitalized capital asset & liability for capital lease payable in government wide
32
Government-wide adjustment for capital lease payment
DR LT Note Payable (reduction of principal) DR Interest Expense CR cash
33
Capital asset - donation journal entries
Modified Accrual: DR Expenditure - capital asset donation offset CR Revenue- asset donation Gov-wide if capitalized: DR Capital asset (FMV) CR Revenue - asset donation If not capitalized just adjust fund expenditure to expense
34
Net investment in capital assets
= (capital assets - accumulated depreciation) - related debt + related deferred inflows - related deferred outflows
35
Valuation of purchased asset
= historical cost + transportation + installation (aka necessary and reasonable costs to put into use)
36
valuation of constructed asset
= Direct labor + overhead + architect fees + insurance premiums (cannot capitalized interest on self-constructed assets)
37
Valuation of initially unrecorded assets
aka discovered assets = estimated cost
38
Valuation of foreclosures
at cost which = lower of: - all taxes, interest, penalties and legal costs OR - FMV
39
Valuation of Trade-ins
at FMV of new asset (with loss or gain recognized based on book value of old asset)
40
Valuation of donated/ escheat assets
at estimated FMV value of date ownership realized
41
Escheat
when something belongs to the government because owner abandoned it
42
Valuation of assets acquired by eminent domain
value of compensation paid to owner
43
when is capitalization not required for artworks
when: - held for public exhibition or research - protected and preserved - proceeds from sale used acquire other collectables otherwise must be capitalized
44
Capitalizing government owned collectables
Fund accounting: recognize expenditure and revenue or cash paid on receipt Government-wide capitalize. (Depreciate only if value declines over time)
45
Exhaustible asset
One whose value declines over time and therefor must be depreciated
46
Accounting for donation of collectibles
Fund accounting: Expenditure offsets revenue (DR expenditure collectable donation offset, CR Revenue -collectable donation) Gov-wide: asset capitalized and revenue recognized
47
When is it not required to depreciate an infrastructure asset
If can demonstrate that it is being maintained/ preserved in a specified condition
48
What is required if infrastructure asset is not being depreciated
Government must: - perform condition assessments at least every three years - have an up-to-date-inventory of eligible assets - estimate amount needed to maintain and preserve
49
Approaches for accounting for infrastructure assets
traditional approach (capitalize and depreciate) Modified approach - preservation costs expensed as incurred - additions and improvements capitalized - no depreciation recorded even in government-wide accounting
50
Disclosures required if use modified approach
- assessed condition of infrastructure asset - basis of assessment - actual vs estimated costs to maintain approved condition
51
Recognition Rules for government intangible assets
Recognize if separable (able to be separated from the government, can be sold, transferred, licensed etc...) Recognize if arise from contractual or other legal rights
52
internally generated intangibles
capitalize if technologically feasible AND expected to provide future services (technology rules) if cannot be capitalized expensed as expenses occur (no additional capitalization after complete)
53
accounting for intangible assets in fund accounting
intangibles not recognized
54
Accounting for intangible assets in government-wide accounting
recognized and amortized over economic life
55
impairment methods for government intangibles
- restoration of cost approach - service units approach - deflated depreciation replacement cost approach
56
impairment of intangible
must be a significant and unexpected decline in service utility
57
Impairment of intangibles: Restoration cost approach
1. Estimate costs to restore the asset 2. Convert restoration cost to historical cost (2 methods): a. Restate restoration cost using an historical price index b. Multiply BV x (Restoration Cost/Replacement Cost) 3. Best for impairment due to physical damage
58
Impairment of intangibles: Service units approach
1. Estimate historical cost of lost service capacity of the asset 2. Determine service units before and after change in asset a. Max. estimated service units before & after b. Total estimated lifetime service units before & after 3. Best for impairment due to laws/regulations or Δ technology
59
Impairment of intangibles: Deflated depreciation replacement cost approach
1. Estimate historical cost of lost service capacity of the asset 2. Depreciated replacement cost deflated to historical equivalent 3. Impairment = BV vs. deflated depreciated replacement cost 4. Best for impairment due to Δ manner or duration of use

Government And Nonprofit Accounting (14 decks)

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